Crisis-ridden mutual insurer Equitable Life has confirmed that it is to pay bonuses to more than 2,000 staff. The pay-outs come as more than 650,000 policyholders face lower-than-expected returns and higher exit penalties if they cash in policies early.

The cost of the bonuses, which equate to an average 12 per cent of staff salaries, is thought to be as much as £8 million.